We all knew it was coming.  It was really only a matter of time.  So now that it is here, what does it really mean?  Well, if you are in New York, it means you have a six month grace period before strict enforcement begins, and you have to get in line with everyone else trying to determine what it really means on a day to day basis.  For those of us not doing business in New York, it is an opportunity to actually have a crystal ball that works to one degree or another.  This may be in our future as well.

So what does the law that was implemented on January First actually say?  Click here to read it, or you can take my word for it that it has some issues as it is written.  Here is a summary of what it does:

• Defines compensation in a very broad manner, including incentive trips and the like
• Defines the purchaser that the disclosure must be made to
• Defines who an insurer is, what an insurance contract is and who an insurance producer is

Those are all fairly straight forward, so where does this start to veer off course?  The methodology of disclosure.  The first issue is that it can be made in writing or orally (Good luck defending an oral disclosure.  Come on guys, really?).  This disclosure spins further out of control when you have to "describe the role of the insurance producer in the sale" (huh?), that the producer will be paid by the insurer, that the compensation varies depending on any number of factors, and that more details are available in writing should the purchaser request them.  Notice this initial disclosure does not include the amount of compensation?!

This is where things really go sideways.  If the written disclosure is requested, a whole myriad of additional items are required.  You really need to read the law for the details, but a couple items of note include:

• The actual amount of compensation, including all items mentioned in the definition of compensation (Good luck with that.  Do you include the value of a trip that you may or may not qualify for?  How much of that is attributable to this policy?)
• A description of any alternate quotes presented by the producer including the compensation derived from each had they been selected.  This could be an incredible amount of work by itself.
• That records need to be kept for at least three years
• That this could be an annual event involving renewals if requested within an appropriate interval by the purchaser

My head hurts already.  Based on all of the uncertainty, I also read the circular that the NY DOI issued in November of last year.  It is a bit better, but there are still a number of issues.  One of the largest is the lack of a uniform format for disclosure.  Based on what I read, two producers could be selling the same contract, receive the exact same amount of compensation, and leave the purchaser without a clue as to what is really ending up in their pockets.  I understand the thought process behind not mandating the format, but the lack of uniformity presents a significant set of issues for the purchaser who is really supposed to benefit from this legislation.  They will still have no idea what is really going on, other than the producer is being paid.  I think they already knew that.  Oh, and the title of this law - Producer Compensation Transparency?  From my perspective it is anything but clear.